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Isis is digging in for a battle that could last months to keep control of Mosul, Iraq's second largest city, by extensively rigging the streets with bombs, preparing scores of suicide bombers, and filling trenches around key access points with burning oil.

Iraqi Prime Minister Haider al-Abadi announced on state TV in the early hours of Monday that the long-awaited operation to retake the city had begun.

Several sources said residents have started an armed resistance themselves, setting fire to Isis vehicles and stealing weapons, although initial reports could not be verified.

Civilians inside Mosul reported in recent days that Isis has prepared booby traps under bridges or hidden inside jackhammered holes on main roads.

The US Defence Department warned last month that Isis could also use its rudimentary attemps to manufacture mustard gas on both residents and the advancing army, providing 50,000 gas masks to Iraqi troops as a precaution.

Several areas have been blocked off with cement blast walls to funnel citizens into neighbourhoods where they can be used as human shields, text messages and photos sent to Reuters showed, and Isis has created an extensive network of underground tunnels for shielding and transporting both equipment and fighters.

The tactics are similar to how Isis has defended other cities, but Mosul will be the biggest battle the group has ever faced. Losing control of the city will ultimately spell their defeat in Iraq.

The UN is worried that fighting could displace up to 700,000 people in need of humanitarian assistance in the first few days, and that agencies on the ground will not be able to cope.

The city - home to two million people - fell under Isis' control in 2014 when the group rapidly expanded its territory across Iraq to form its so-called caliphate.

The Iraqi army, with help from US advisors, has been gearing up to retake Mosul in the last few months, making steady gains on nearby villages and establishing supply lines to and from the US base in Qayyarah, 80 kilometres (50 miles) away.

Militants in the city have also stepped up surveillance and sniper presence on rooftops at night to quash any signs of rebellion by residents.

One civilian said via Whatsapp that children as young as eight, sometimes armed with pistols and knives, have been deployed to monitor and inform on the population. The children then recruit other children for the same task.

"[Isis] are desperate and they could force even children to fight once government troops are at the doors of Mosul," they wrote.

On Friday, it emerged that 58 people accused of organising an armed resistance plot were executed by drowning and their bodies dumped in a mass grave, Iraqi officials and residents said.

Signs of growing dissent have emerged in recent months, including anti-Isis graffiti and reports that residents were risking their lives to provide forces outside the city with intelligence useful for the army offensive.

Mr al-Abadi has previously urged civilians to stand up to and kill militants if possible.